Lenders like us who use personal income as part of their affordability tests are required to undertake a detailed affordability assessment taking account of income, essential expenditure and living costs and also credit commitments. The assessment of credit commitments must include mortgages from all of the borrower’s properties and we are required to stress test these mortgages in line with guidance and rules set by the FCA, PRA and FPC.

From 28th September for all BTL applications, the way we stress test background mortgages has been enhanced to include a 3% stress to the balance of all of the customer’s background mortgages and the resulting increase to monthly payments is included in our affordability assessment. The 3% stress is applied to all BTL and residential mortgages the customer holds.

The effect of the increased stress testing increases overall outgoings which reduces the level of surplus income we can use in our affordability assessment of the BTL mortgage. For a large number of cases affordability will still be present and there will be no impact on our decision to lend. There will be occasions though where the increased stress testing means we are unable to lend on cases which we would have been able to prior to 28th September. This is most likely to be the case for customers who have high residential mortgage balances and/or multiple BTL mortgages.

Due to the changed assessment we recommend you contact us to discuss any new BTL enquiries prior to application submission.

For residential applications there has been no change to the way we stress test background mortgages.